• ‘Peso stable in 2015’


    Analysts see BSP policy, economic strength supporting PH currency

    The latest decision of the central bank to keep its key policy rates unchanged and the sustained strength of the country’s macroeconomic fundamentals will provide steady support to the local currency this year, analysts said on Friday.

    “The peso may remain in tight ranges as markets had already priced in the outcome of the BSP meeting,” Emilio Neri Jr., economist at the Bank of the Philippine Islands (BPI), said.

    Neri was referring to the policy decision of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) at its first meeting in 2015 on Feb 12, maintaining the BSP’s rate for the overnight borrowing, or reverse repurchase (RRP) facility at 4 percent, and the rate for overnight lending, or repurchase facility at 6 percent.

    The rate for the special deposit account (SDA) also remains at the current level of 2.50 percent, as does the reserve requirement ratio (RRR) for banks at 20 percent.

    If there are external factors that may cause any disturbance to the regional currencies, such as the Greek debt crisis and possible prolonged armed conflict in Ukraine, the impact on the peso is expected to be manageable, analysts said.

    Neri had said that the peso might experience a “very manageable” 4 percent depreciation in 2015 if the United States Federal Reserve hiked its interest rates later this year. Most analysts still anticipate the Fed will.

    No policy change before Oct
    ING Bank Manila said the central bank is likely to continue to address any possible exchange rate volatilities by maintaining its monetary policy settings until October.

    “Monetary policy settings are likely to remain on hold until October. We expect the BSP to maintain a comfortable interest rate differential to moderate possible PHP volatility,” ING Bank Manila senior economist Joey Cuyegkeng said.

    In line with the market’s expectation of a September or October Fed rate hike, Cuyegkeng said the BSP might implement a 50-basis point rate hike in its sixth monetary policy meeting this year, scheduled for late September.

    Rangebound peso
    Banking giant Standard Chartered Bank said that the current BSP policy and SDA rates will have a relatively muted impact on the peso.

    StanChart said the peso has been the best-performing Asia ex-Japan currency since end-September 2014, buoyed by strong macroeconomic fundamentals, robust remittances and the positive impact of lower oil prices.

    “Accordingly, we expect the USD-PHP to remain rangebound even in a stronger USD environment. We forecast the USD-PHP at 45 in mid-2015 and 43.50 by end-2015,” it said.


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